“You Don’t Have to Invest the Money”

Another expert argues for cash liquidity... so you can use your cash to take risks that might out-earn the market.

Paradise, New Zealand. Photo credit: Tom Hall, CC BY 2.0.

I’ve lost track of how many “pro-cash” articles I’ve shared in the past few months, but here’s one from Carl Richards, the NYT’s Sketch Guy:

If you’re a bit scared about investing your money right now, you’re not alone. I’ve received many emails and comments recently from people who have money to invest. They even know how it should be invested. But they just can’t get themselves to put the money into the stock market.
Why are they scared? Many of them cite the fact that markets are at record highs and the endless stream of uncertainty in the news.
Feel that way yourself? Well guess what: You don’t have to invest the money. Really, it’s true!

Richards explains that it’s okay to keep your cash in a savings account if you feel uncertain about the market right now. Yes, you won’t earn much in interest and might miss out on some market gains, but knowing that your cash is safe might inspire you to take risks that could earn you even more money:

The fact that I didn’t have to worry about losing money in that area of my life allowed me to feel comfortable taking risks in other areas. I’ve started two or three new businesses and moved my family to New Zealand. The risks I have taken have provided, and will continue to provide, a much higher return than what I might have received if I remained fully invested in the markets.

So wait, where did Richards get the cash for those businesses? Was it from the pile of money he wasn’t investing, or was it from a different pile of money? How much money did it cost him to start two or three new businesses, and why can’t he remember whether it was two or three?

I’m all for taking career risks and investing in yourself—I’ve done it more than once. But Richards isn’t really addressing the question of whether we should be investing in the market right now; he’s arguing that if we save cash, we could use it for even bigger risks, like starting multiple businesses!

The NYT is currently running this article immediately above the article we discussed earlier this week, the one that argued we need to stockpile as much cash as possible:

Based on what I know now, I have put an addendum on the retirement advice I give to people: “And no matter how much money you think you are going to need, save another 15 percent, just in case.”

So what do we do with our money? Put it in a savings account? Invest it in the stock market? Or start two or three businesses because that’s the only way we’ll ever earn enough money to retire?